Monthly Archives: June 2015

Fitting Data To Models At NOAA

08 Monday Jun 2015

Posted by in Global Warming

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Dilbert Made Up Numbers

If the facts don’t suit your agenda, change them! The 18-year “hiatus” in global warming, which has made a shambles of climate model predictions, is now said to have been based on “incorrect data”, according to researchers at National Oceanic and Atmospheric Administration (NOAA). Translation: they have created new data “adjustments” that tell a story more consistent with their preferred narrative, namely, that man-made carbon emissions are forcing global temperatures upward, more or less steadily. The New York Times’ report on the research took a fairly uncritical tone, despite immediate cautions and rebuttals from a number of authorities. On balance, the NOAA claims seem rather laughable.

Ross McKitrick has an excellent discussion of the NOAA adjustments on the Watts Up With That? blog (WUWT). His post reinforces the difficulty of aggregating temperature data in a meaningful way. A given thermometer in a fixed location can yield drifting temperatures over time due to changes in the surrounding environment, such as urbanization. In addition, weather stations are dispersed in irregular ways with extremely uneven coverage, and even worse, they have come and gone over time. There are gaps in the data that must be filled. There might be international differences in reporting practices as well. Sea surface temperature measurement is subject to even greater uncertainty. They can be broadly classified into temperatures collected on buoys and those collected by ships, and the latter have been taken in a variety of ways, from samples collected in various kinds of buckets, hull sensors, engine room intakes, and deck temperatures. The satellite readings, which are a recent development, are accurate in tracking changes, but the levels must be calibrated to other data. Here’s McKitrick on the measurements taken on ships:

“… in about half the cases people did not record which method was used to take the sample (Hirahari et al. 2014). In some cases they noted that, for example, ERI readings were obtained but they not indicate the depth. Or they might not record the height of the ship when the MAT reading is taken.“

The upshot is that calculating a global mean temperature is a statistical exercise fraught with uncertainty. A calculated mean at any point in time is an estimate of a conceptual value. The estimate is one of many possible estimates around the “true” value. Given the measurement difficulties, any meaningful confidence interval for the true mean would likely be so broad as to render inconsequential the much-discussed temperature trends of the past 50 years.

McKitrick emphasizes the three major changes made by NOAA, all having to do with sea surface temperatures:

  1. NOAA has decided to apply an upward adjustment to bring buoy temperature records into line with ship temperatures. This is curious, because most researchers have concluded that the ship temperatures are subject to greater bias. Also, the frequency of buoy records has been rising as a share of total sea temperature readings.
  2. NOAA added extra weight to the buoy readings, a decision which was unexplained.
  3. They applied a relatively large downward adjustment to temperatures collected by ships during 1998-2000.

Even the difference between the temperatures measured by ships and buoys (0.12 degrees Celsius), taken at face value, has a confidence interval (95%?) that is about 29 times as large as the difference. That adjustments such as those above are made with a straight face is nothing short of preposterous.

A number of other researchers have weighed in on the NOAA adjustments. Carl Beisner summarizes some of this work. He quotes McKitrick as well as Judith Curry:

“I think that uncertainties in global surface temperature anomalies is [sic] substantially understated. The surface temperature data sets that I have confidence in are the UK group and also Berkeley Earth. This short paper in Science is not adequate to explain and explore the very large changes that have been made to the NOAA data set. The global surface temperature datasets are clearly a moving target.“

There are a number of other posts this week on WUWT regarding the NOAA adjustments. Some of the experts, like Judith Curry, emphasize the new disparities created by NOAA’s adjustments with other well-regarded temperature series. It will be interesting to see how these differences are debated. Let’s hope that the discussion is driven wholly by science and not politics, but I fear that the latter will have a major impact on the debate. It has already.

Major Mistake: The Minimum Opportunity Wage

06 Saturday Jun 2015

Posted by in Price Controls

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government-problem

City leaders in St. Louis and Kansas City are the latest to fantasize that market manipulation can serve as a pathway to “economic justice”. They want to raise the local minimum wage to $15 by 2020, following similar actions in Los Angeles, Oakland  and Seattle. They will harm the lowest-skilled workers in these cities, not to mention local businesses, their own local economies and their own city budgets. Like many populists on the national level with a challenged understanding of market forces (such as Robert Reich), these politicians won’t recognize the evidence when it comes in. If they do, they won’t find it politically expedient to own up to it. A more cynical view is that the hike’s gradual phase-in may be a deliberate attempt to conceal its negative consequences.

There are many reasons to oppose a higher minimum wage, or any minimum wage for that matter. Prices (including wages) are rich with information about demand conditions and scarcity. They provide signals for owners and users of resources that guide them toward the best decisions. Price controls, such as a wage floor like the minimum wage, short-circuit those signals and are notorious for their disastrous unintended (but very predictable) consequences. Steve Chapman at Reason Magazine discusses the mechanics of such distortions here.

Supporters of a higher minimum wage usually fail to recognize the relationship between wages and worker productivity. That connection is why the imposition of a wage floor leads to a surplus of low-skilled labor. Those with the least skills and experience are the most likely to lose their jobs, work fewer hours or not be hired. In another Reason article, Brian Doherty explains that this is a thorny problem for charities providing transitional employment to workers with low-skills or employability. He also notes the following:

“All sorts of jobs have elements of learning or training, especially at the entry level. Merely having a job at all can have value down the line worth enormously more than the wage you are currently earning in terms of a proven track record of reliable employability or moving up within a particular organization.“

The negative employment effects of a higher wage floor are greater if the employer cannot easily pass higher costs along to customers. That’s why firms in highly competitive markets (and their workers) are more vulnerable. This detriment is all the worse when a higher wage floor is imposed within a single jurisdiction, such as the city of St. Louis. Bordering municipalities stand to benefit from the distorted wage levels in the city, but the net effect will be worse than a wash for the region, as adjustments to the new, artificial conditions are not costless. Again, it is likely that the least capable workers and least resourceful firms will be harmed the most.

The negative effects of a higher wage floor are also greater when substitutes for low-skilled labor are available. Here is a video on the robot solution for fast food order-taking. In fact, today there are robots capable of preparing meals, mopping floors, and performing a variety of other menial tasks. Alternatively, more experienced workers may be asked to perform more menial tasks or work longer hours. Either way, the employer takes a hit. Ultimately, the best alternative for some firms will be to close.

The impact of the higher minimum on the wage rates of more skilled workers is likely to be muted. A correspondent of mine mentioned the consequences of wage compression. From the link:

“In some cases, compression (or inequity) increases the risk of a fight or flee phenomonon [sic]–disgruntlement culminating in union organizing campaigns or, in the case of flee, higher turnover as the result of employees quitting. … all too often, companies are forced to address the problem by adjusting their entire compensation systems–usually upward and across-the-board. .. While wage adjustments may sound good for those who do not have to worry about profits and losses, the real impact for a company typically means it must either increase productivity or lay people off.“

For those who doubt the impact of the minimum wage hike on employment decisions, consider this calculation by Mark Perry:

“The pending 67% minimum wage hike in LA (from $9 to $15 per hour by 2020), which is the same as a $6 per hour tax (or $12,480 annual tax per full-time employee and more like $13,500 per year with increased employer payroll taxes…)….“

Don Boudreaux offers another interesting perspective, asking whether a change in the way the minimum wage is enforced might influence opinion:

“... if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?“

Proponents of a higher minimum wage often cite a study from 1994 by David Card and Alan Krueger purporting to show that a higher minimum wage in New Jersey actually increased employment in the fast food industry. Tim Worstall at Forbes discussed a severe shortcoming of the Card/Krueger study (HT: Don Boudreaux): Card and Krueger failed to include more labor-intensive independent operators in their analysis, instead focusing exclusively on employment at fast-food chain franchises. The latter were likely to benefit from the failure of independent competitors.

Another common argument put forward by supporters of higher minimum wages is that economic theory predicts positive employment effects if employers have monopsony power in hiring labor, or power to influence the market wage. This is a stretch: it describes labor market conditions in very few localities. Of course, any employer in an unregulated market is free to offer noncompetitive wages, but they will suffer the consequences of taking less skilled and less experienced hires, higher labor turnover and ultimately a competitive disadvantage. Such forces lead rational employers to offer competitive wages for the skills levels they require.

Minimum wages are also defended as an anti-poverty program, but this is a weak argument. A recent post at Coyote Blog explains “Why Minimum Wage Increases are a Terrible Anti-Poverty Program“. Among other points:

“Most minimum wage earners are not poor. The vast majority of minimum wage jobs are held as second jobs or held by second earners in a household or by the kids of affluent households. …

Most people in poverty don’t make the minimum wage. In fact, the typically [sic] hourly income of the poor appears to be around $14 an hour. The problem is not the hourly rate, the problem is the availability of work. The poor are poor because they don’t get enough job hours. …

Many young workers or poor workers with a spotty work record need to build a reliable work history to get better work in the future…. Further, many folks without much experience in the job market are missing critical skills — by these I am not talking about sophisticated things like CNC machine tool programming. I am referring to prosaic skills you likely take for granted (check your privilege!) such as showing up reliably each day for work, overcoming the typical frictions of working with diverse teammates, and working to achieve management-set goals via a defined process.”

Some of the same issues are highlighted by the Show-Me Institute, a Missouri think tank, in “Minimum Wage Increases Not Effective at Fighting Poverty“.

A higher minimum wage is one of those proposals that “sound good” to the progressive mind, but are counter-productive in the extreme. The cities of St. Louis and Kansas City would do well to avoid market manipulation that is likely to backfire.

Haunted By Food Demons

03 Wednesday Jun 2015

Posted by in Biotechnology

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dr-jekyll gmo Glyphosate herbicide usage (as in Roundup) in the U.S. has increased dramatically over the last two decades, replacing the use of far more toxic herbicides on many crops. That’s one of the major points in a post at The Credible Hulk blog entitled “About those more caustic herbicides that glyphosate helped replace“. The increased use of glyphosate corresponded to heavier reliance on glyphosate-tolerant strains of genetically-engineered crops. The author provides charts and other details on the changing use of a number of different herbicides both over time and across crop varieties.

“… the purpose of this [post] is to show that when opponents of GE technology and of glyphosate claim that GR crops are bad on the grounds that they increased glyphosate use, they are leaving out critical information that would be highly inconvenient for their narrative.“

The use of insect-resistant GE crops has also been associated with a declines in total pesticide use. [The links above are all given in The Credible Hulk post].

There is a great deal of distortion prompted by certain interest groups who oppose the use of synthetic herbicides and insecticides and GMOs. Irrational fears among consumers are inflamed by this sort of propaganda. This post and this post give farmers’ perspectives on some of the misinformation with respect to glyphosate. No, farmer’s do not “drench” their crops with glyphosate prior to harvest. That claim is pure hyperbole.

It’s also important to note that organic crops are not free of treatments. So-called organic pesticides are often just as toxic as synthetic pesticides, and they are often used in heavier quantities. Furthermore, organic foods carry undeniable health risks to consumers. A balanced view must acknowledge the benefits of crop treatments to consumers (whether the treatments are organic or nonorganic), that residues on produce in the U.S. are minimal, that safety still dictates that consumers wash their produce, and that consumers deserve a free choice between crops grown conventionally or organically.

Busted Big Government

01 Monday Jun 2015

Posted by in National Debt

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accounting or accountability

Alan Greenspan says we are “way underestimating” the U.S. national debt. His statements on this point make a great follow-up to last night’s post on bailouts. Here are a couple of recent Greeenspan quotes from an article by Nicholas Ballasy:

“Largely because we are not including what I would call contingent liabilities, that is the issue of, which is answered by a question: what is the probability that in today’s environment JP Morgan would be allowed to default? The answer is zero or less.”

Now, that means that whole balance sheet is a contingent liability. Now to be sure, while it’s contingent, there’s no interest payments but ultimately that overhangs the structure because we have committed in so many different ways to guarantee this, that and the other thing. It’s not only Fannie and Freddie but it’s a whole series of financial institutions and, regrettably, it is also non-financial institutions.”

The bailout barometer I mentioned last night is an eye-opener, but it reflects a very incomplete view of the contingent liabilities faced by the government. Ballasy discusses some massive unfunded liabilities associated with programs like Social Security, which has a trust fund that Greenspan calls “meaningless”:

“The Social Security and Medicare Trustees 2014 annual report said while legislation is needed to address all of Social Security’s financial imbalances, ‘the need has become most urgent with respect to the program’s disability insurance component. Lawmakers need to act soon to avoid automatic reductions in payments to DI beneficiaries in late 2016.’”

Lawrence Lindsey, an economic official in the Bush Administration, says the real national debt is closer to 300 percent of GDP when unfunded obligations for Social Security and Medicare are added. The fast-dissipating disability insurance fund was the subject of another post here two days ago. It is a case study in irresponsible governance. Here is Ballasy with another Greenspan quote:

“According to Greenspan, entitlement spending in the U.S. was 4.7 percent of GDP in 1967 compared to more than 14 percent today. ‘Had we kept it at that level, our productivity would be far higher today. The average wage would be very significantly higher, the standard of living would be higher and what we have to do is think about how we are going to shrink that pie back and, to me, that is the single most important problem that confronts this country,’ he said.“

Shrinking the ongoing flow of entitlements is a tall political order. Avoiding the contingencies that would add to existing obligations calls for economic policies that promote stability, rather than boom and bust cycles that follow misguided efforts to stimulate the economy. Still another matter is to deal with the obligations that already exist. Higher taxes, inflation and default do not represent attractive policy options, but our activist government has placed us squarely in that corner.